European equities are rising for a third consecutive day as investors cheer for signs that inflation, supply chain bottlenecks and natural gas prices are easing.
Europe’s Stoxx 600 index rose 1% in Wednesday’s trade and is now up 3.3% since markets opened 2023 trading on Monday. Germany’s DAX rose 1.8% on Wednesday, while France’s CAC gained 1.9%. London’s FTSE 100 index also gained 0.4%.
Despite the undeniably bleak outlook for the global economy – the International Monetary Fund expects a third of economies to slip into recession this year – investors in European equities are feeling cautiously optimistic after the release of a better-than-expected series of data, indicating that the slowdown may not be as deep as feared.
On Wednesday, France’s statistics institute said consumer price inflation was 5.9% in December, down from 6.2% in November. A drop in energy prices drove the decline, the institute said.
In Germany, Europe’s biggest economy, provisional data released on Tuesday showed that inflation fell to 8.6% in December from 10% the previous month. A one-time government payment to households to subsidize energy bills has helped bring prices down.
Weaker inflation is raising hopes among investors that the European Central Bank may raise interest rates less aggressively this year after raising the cost of borrowing four times in a row since July 2022.
And business activity in the 20 countries that share the euro, while still historically low, increased in December from the previous month, according to a survey of businesses released by S&P Global on Wednesday.
This adds to promising survey data released on Monday, also by S&P Global, showing that supply chain pressures and inflation for manufacturers in the region appear to be easing.
Chris Beauchamp, chief market analyst at IG, an online trading platform, told CNN that the markets’ momentum is due in part to slowing inflation.
“It seems that investors are being tempted to come back now that the war is over. [Rússia-Ucrânia] has been contained, and the worst of the discussions about sanctions seems over for now,” he added.
Traders are not as excited across the pond. The S&P 500 was down 0.4% at the close of trading on Tuesday and the Dow ended little changed despite rising in the morning. US futures rose slightly on Wednesday morning, but still trailed European markets.
Wall Street’s relatively sluggish start to the new year may be down to a higher number of underperforming tech stocks in the US, according to Beauchamp. The tech-heavy Nasdaq Composite is down 34% from the same period last year.
“If we’re seeing a continued flight to value, then the relative low price of European equities is a big plus,” he said. “The lack of expensive tech names has been a real boost for the FTSE 100, but other indexes in Europe are also improving.”
A mitigated energy crisis
High levels of natural gas storage and exceptionally mild weather have put Europe in a stronger position than many feared a few months ago.
Benchmark prices for European natural gas futures have fallen 10% since Monday to 69 euros ($73) per megawatt-hour. They are now down 79% from their all-time high in August, when they traded at 342 euros ($363) per megawatt-hour.
European countries rushed to replenish their gas stocks last year as Russia, once their biggest supplier, cut back on exports. The stores are currently occupied at 84% of capacity – compared to 52% in the same period last year.
As such, Europe is likely to avoid a much-feared power shortage this winter, though it still faces the task of replenishing its storage ahead of next winter’s heating season, with little gas now flowing from Russia.
Record temperatures helped keep storage levels high. On January 1, at least eight European countries recorded their hottest January day, climatologist Maximiliano Herrera told CNN on Tuesday.
Fears over energy supplies that led to significant outflows in European equities last year now appear “unwarranted as the risk of a severe energy shortage has diminished,” Deutsche Bank analysts Maximilian Uleer and Carolin Raab wrote in a note on Wednesday. -market.
Source: CNN Brasil

A journalist with over 7 years of experience in the news industry, currently working at World Stock Market as an author for the Entertainment section and also contributing to the Economics or finance section on a part-time basis. Has a passion for Entertainment and fashion topics, and has put in a lot of research and effort to provide accurate information to readers.